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Conglomerate Mergers and Entry in Innovative Industries

Author

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  • Federico Etro

    (Department of Economics, Ca' Foscari University of Venice; University of Florence; C.R.A)

Abstract

I study a merger between producers of complement inputs facing entry of superior inputs, with investment by the incumbents in deterministic cost reduction and by the entrants in probabilistic innovation, and competition in prices. The merger is profitable by solving Cournot complementarity problems in investment and pricing, and has positive (negative) effects on R&D by the incumbents (entrants). With inelastic demand the merger harms consumers if the incumbents are efficient enough even without bundling, and always when a commitment to bundling is adopted. Instead, with a demand elastic enough, the merger increases consumer surplus even when a commitment to pure bundling is feasible.

Suggested Citation

  • Federico Etro, 2018. "Conglomerate Mergers and Entry in Innovative Industries," Working Papers 2018:19, Department of Economics, University of Venice "Ca' Foscari".
    • Handle: RePEc:ven:wpaper:2018:19
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    Cited by:

    1. Etro, Federico, 2019. "Mergers of complements and entry in innovative industries," International Journal of Industrial Organization, Elsevier, vol. 65(C), pages 302-326.

    More about this item

    Keywords

    Mergers; R&D; Cournot complementarity; bundling; antitrust in high-tech industries;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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